Case-Law Round Up

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Harvey (PO 1394) Bulk Transfer delay causes financial loss to a member
The Deputy Pensions Ombudsman (DPO) partly upheld a complaint from a member that he suffered financial loss due to his pension fund being transferred outside of a 10 day transfer window, which had been agreed under a bulk transfer. The member was also unhappy that the funds were sent via cheque rather than electronically and complained accordingly.

As mentioned, the DPO partly upheld the complaint; however the DPO held that the respondent’s offer of paying the member’s loss, on the basis that his funds were transferred and invested with the incoming pension provider 7 days after his transfer request was reasonable under the circumstances.

The DPO also held that given the funds were calculated to have been invested the day after the deemed investment date (7 days from the date the claim form was issued) the member had not suffered any additional detriment than if the funds had been transferred electronically.

The member was awarded £275 for the distress and inconvenience caused by the matter.

This determination shows that delays in transfer payments can cause financial loss. Consequently, trustees, employers and their advisors should be mindful of such transfer payments and keep members updated on their progress. This determination also confirms that transfer payments made by cheque are acceptable if the member is treated fairly, i.e. no cheque clearance period. However, we recommend that where possible, payments should be made by electronic means to minimise any possible disputes arising.

Smith (PO-1746) failure to keep accurate member records leads to maladministration
The Pensions Ombudsman (PO) determined that two former scheme administrators together with the trustees of a defined contribution scheme were at fault and equally liable for maladministration as a consequence of failing to secure Mr Smith’s deferred member’s pension benefits upon the scheme being wound up in 2004.

The PO agreed with Mr Smith’s complaint. The issue arose due to the incumbent scheme administrator furnishing the incoming scheme administrator with inaccurate member data that unfortunately showed that (incorrectly) Mr Smith had no funds in the scheme. Furthermore, the new scheme administrator failed to take reasonable steps to audit the records correctly and used Mr Smith’s unidentified funds as part of a surplus to cover employer contributions and scheme expenses.

The PO found that as the trustees were responsible for the winding up of the defined contribution scheme in 2004, the trustees were also ultimately responsible for making sure that all members’ benefits under the scheme had been properly secured.

The determination highlights the importance of improving and maintaining standards of scheme record keeping. Changing scheme administrators is common place and therefore member data needs to be 100 percent accurate to avoid the likelihood of similar mistakes occurring.